German bank ratings hit by eurozone fears

Six German banks were hit by a credit rating downgrade today as fears about the eurozone continued to spread.

Three Austrian banks were also downgraded by ratings agency Moody’s, which blamed “the increased risk of further shocks” in the single currency area.

Spain yesterday admitted for the first time that it can no longer raise money on the markets to deal with its debts and made its strongest call yet for European cash to help rescue its banks.

That appeal is meeting opposition in Germany, however, meaning Spain may be forced to apply for a fully-fledged bail-out.

Volker Kauder, parliamentary leader of Angela Merkel’s conservative bloc in the German parliament, today signalled that rescue money could only go to Spain as a country, rather than to help its banks. “I don’t see this possibility,” he said of the latter option.

Spain’s economy minister Luis de Guindos said there were no immediate plans to request a bank bail-out. “We are not preparing anything,” he said, as Madrid awaits an IMF report into the sector due on Monday and then further reports from independent auditors.

Spain’s prime minister, Mariano Rajoy, is leading calls for Europe to agree a banking union that would allow states to share their debts.

Finance ministers from the G7 group of major industrialised nations held talks yesterday about the crisis on the Continent, discussing “progress towards financial and fiscal union in Europe”, but no concrete steps were taken.

Despite today’s bank downgrades, which included Germany’s second-

biggest lender Commerzbank, markets across Europe were up in early trading. Analysts said the rally was being driven by trading in America and Asia. The FTSE was up 1.48 per cent to 5337.79, Germany’s Dax gained 1.75 per cent and France’s Cac-40 was up 2.13 per cent.

David Cameron was today preparing for a trip to Berlin, where he will meet Chancellor Merkel for talks, following a phone conversation with Barack Obama about the euro crisis.